Orion Health has announced plans to sell its core profitable Rhapsody integration engine business to British private investment firm Hg Capital for £105m ($NZ205m), with some of the proceeds to be reinvested in its population health and hospitals divisions.

Orion will continue to 100% own its hospital software division and 75% of its population health business, with Hg to take a 25% shareholding in population health, while Orion will retain a 25% share in Rhapsody.

Orion’s Rhapsody business provides the technology behind a number of high profile UK shared records initiatives, including Bristol Connecting Care, Dorset Care Record and large parts of Scotland and Northern Ireland, and is widely regarded as one of the best integration engines in the market.

The deal with Hg follows a strategic review by Auckland-based Orion that started in April last year and has seen the company in sale negotiations for a number of months.

In May Orion reported losses of £21m (NZ$40m) and job cuts of 177 internationally.

In a complex deal with Hg Orion will use some £14.3m (NZ$28m) to acquire about 25 per cent of Rhapsody and £6.15m (NZ$12m) to reinvest in a controlling stake in its population health unit, while providing a net £15.36 (NZ$30m) of cash to fund ongoing operations.

Much of the remainder of the sale proceeds will be used to fund a share buyback.

Hg Capital is a sector expert investor focused on technology businesses, primarily in Europe, with £10 billion of funds under management, and an investor in SaaS healthcare IT firm Allocate, and a range of other technology businesses.

As well as shareholder approval, the deal will require clearance from New Zealand’s Overseas Investment Office.

“This investment provides Orion Health with a tremendous opportunity to deliver on our vision for customers, our people and for the healthcare sector,” Orion CEO Ian McCrae said in a statement.

“We received strong interest in Orion Health’s business throughout the strategic review process and the board and I believe that Hg is the right partner to accelerate the expansion of Rhapsody and support our vision for population health.”

“Hg has been researching the theme of interoperability and population health management in healthcare IT over many years,” said David Issott, partner, Hg. “We believe this is a key global growth theme backed by substantial market funding and resources.

He added: “Rhapsody provides fantastic products and services for this market and we look forward to partnering with the team at Rhapsody to maximise its potential across the globe. We are also excited to work with Ian and the team to realise the full potential of the population health business.”

Philippe Houssiau, until recently the head of health for DXC (formerly CSC) in the UK, has been brought in to lead the Rhapsody business and will join the new board of population health upon completion.